HFT in my backyard | New Line Networks

(CHECK THE UPDATE BELOW)

Well, the “HFT in my backyard’ series is a no-ending story, sellsally. By checking the Ofcom licences I realized a new competitor showed up yesterday. This new licence (1027086) was granted on February 18, 2015 to a Chicago firm named New Line Networks LLC. That’s interesting because this path (in the UK one Ofcom licence is for one path) goes from Manston (UK) to… the tall Houtem tower purchased by Jump Trading in Belgium – again, it’s about crossing the channel, and again it’s about Jump.

First thought: Jump owns the Houtem tower, so that would mean they authorize a competitor to put dishes on this tower. The New Line Networks path, Houtem-Manston, is exactly the same as the Jump one. That’s interesting: the Houtem tower, which was the start of my investigation, seems to be a critical location now. Jump bought the tower for $5.000.000 in January 2013 in order to cross the channel by bypassing the Swingate towers where most of the other competitors are (that was a good move as with the Houtem tower they save some kilometers and given that the tower is really tall, they may have less problems with water reflection, etc.). What’s more, Jump resells bandwidth to Perseus and I know that one other competitor also leases the Jump microwave network to carry data between London and Frankfurt. That means a lot of HFT firms benefit from the Houtem tower now (Perseus’ clients, etc.). That could answer to one question I was wondering: why purchasing a tower for $5.000.000 since $5.000.000 is more or less the price you have to pay to build a whole microwave network between London and Frankfurt? Well, if Jump “leases” this tower (in different ways) to various HFT firms, the investment may be worth.

By the way, Jump is not the only competitor trying to bypass Swingate: Latent Networks, McKay Brothers and Optiver also have licences on a building not so far from the Manston tower, the very last licences being granted in December 2014 to Latent (for a Manston-Benfleet path) and Optiver (for a Manston-Dunkerque path).

Anyway, I checked the name “New Line Networks LLC” on Google and… what a surprise! New Line Networks is a joint-venture between Jump Trading (it’s not surprising as the Houtem tower is involved) and… KCG, aka Getco – here is the surprise. KCG made public this press release on February 12, 2015, a few days before the first New Line Networks licences appeared. “KCG Holdings, Inc. (NYSE: KCG) announced today that its subsidiary, Geodesic Networks, LLC, and World Class Wireless, LLC have created a joint venture, New Line Networks LLC. New Line Networks will explore opportunities to leverage infrastructure investment, including re-selling network bandwidth to industry participants and third party vendors. Through this venture, New Line Networks will bring together complementary network and communication infrastructure while simultaneously providing additional data transmission bandwidth to the marketplace.”

How interesting is that. As I wrote in Part IV, KCG, under the name Global Colocations, purchased some of the Latent Networks licences in the UK in September 2014, meaning that KCG already had some paths between London and Frankfurt before working on New Line Networks along with Jump:

“Through this venture, New Line Networks will bring together complementary network and communication infrastructure” the press release says. The only way to understand what’s going is, in my opinion, that KCG and Jump are merging their best paths to create one most efficient/fastest network, and that’s intriguing. Thanks to the Houtem tower Jump clearly has an advantage: the Houtem-Basildon path through Manston is nearly a straight line…

… so that would mean KCG may have better paths in Belgium or in Germany and that they may be involved in the new New Line Networks network (I can’t tell as there is no public data about the licences in Belgium, and that’s a shame). Only speculations.

There is more: also yesterday, New Line Networks purchased a bulk of Ofcom licences to…Communication Infrastructure UK (CIC) – a new surprise. I didn’t talk a lot about CIC before but the firm was one of the first to build a microwave network between New York and Chicago and after that they bought a lot of licences in France and in the UK. I didn’t talk about this network because it seems that CIC never installed dishes where they got licences (but I may be wrong). The more interesting is that CIC was purchased last year by Perseus – this public datatells us that that on March 3, 2014, Mr. Jock Percy was appointed as an executive of CIC, and Mr. Percy is the Perseus CEO. (One amazing detail: CIC had an Ofcom licence in Houtem before the tower was bought by Jump Trading). So… KCG bought the Latent licences, which are now a part of New Line Networks, and Perseus, who resells the Jump bandwidth, sold their CIC licences to New Line Networks, partially owned by Jump (hard to follow, isn’t it?). Here is the map of the old CIC paths now owned by New Line Networks:

It is a bit disappointing. Most of these new New Line Networks licences are for the same towers/paths. But we can see that the new firm bought the old Houtem-Manston path (meaning they have several licences in Houtem now) and another path to cross the Channel, from Calais (France) to Swingate (UK) – probably to go to Slough. What’s more, they also bought some licences involving towers needed to go to Cornwall, where the microwave networks meet the transatlantic cables to go to New Jersey and then to Chicago – after all, both Jump and KCG are Chicago firms. (By the way: the fact New Line bought licences to go to Cornwall may confirm that the new Hibernia cable, Project Express, whose landing station is not in Cornwall, may not be available to the HFT microwave competitors – at least for now).

All of this is a little bit confused, but I am pretty sure all the HFT firms who visit this blog know what is going on here. Two of the major (and historical) HFT firms from Chicago are working together to build a super-microwave network in Europe, joining their towers/licences and reselling all the stuff to customers who will always be slower than them. The KCG press release says that New Line will resell “network bandwidth to industry participants and third party vendors… while simultaneously providing additional data transmission bandwidth to the marketplace”. This is like a message. That means the McKay Brothers network, providing data for the parent company Quincy Data, may face a new and strong competitor. “HFT” is hard.

UPDATE (02.21.2015)

Yesterday I did not have the time to check all the Ofcom data, and I did not realize that New Line Networks has bought all the CIC licences (I only checked the first spectrum trades). It appears that in reality New Line Networks purchased licences for a whole network between France/Belgium and Basildon/Slough… and Cornwall. That’s impressive – we talk about hundreds of licences here that showed up in one day. Here is the (future?) New Line Networks:

Since New Line is a joint venture between KCG/Getco/Knight and Jump Trading, we would have to add all the Getco/Global Colocation Services licences and above all the hundreds of Jump licences. All of that may give rise to a new mega-microwave network in Europe. There is a lot to say here – I think we can learn a lot from this new project. I’ll speculate on that in the very last part of this series, due to be posted soon.

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8 Comments

There we have it – the endgame on Basildon-FR2. Makes the other networks start to look fairly low-value now unless they’re on this path. Wonder what the response will be from the rest of the participants on this corridor…

Probably the endgame, yes. I did not expect this. This is an impressive industrial move (cf. the update). Looks like two major proprietary trading firms now compete with providers like McKay or Nexxcom. It raises a lot of questions…